I was talking to one of my friends the other day and she mentioned her concern over her son’s 529 college savings plan. She talked about the market, how it never seems to go up enough. How, when they first invested in the plan, the Dow was much higher than it is today and how she feels that, at this rate, the 529 plan is not going to be enough to fund her son’s four years away at school.
I told her not to worry about it. Why? How could I be so flippant? Don’t I understand how dire this is, and how bad the market is? Of course I do. But I also understand her situation. You see…her son is not exactly going in to college this year.
He is 3 years old.
Okay, so can you see why I told her not to worry? With another 15 years left to invest in the 529 plan—and really, you could lump your retirement plans into this scenario too—you don’t need to be paranoid about them growing right now.
Naturally, it is frustrating to see a loss in your account. You put $5,000 in the 529 plan and now it’s only worth $3,300. I get it. But the thing to remember about investing is that it makes sense to buy low and sell high—not to buy high and sell low. Talk to your financial advisor about buying more right now. See what he or she suggests as a good investment.
You may be a little gun shy, and that high-risk, aggressive portfolio might feel like a bad idea to you now—and that’s okay. You can always change your risk tolerance in your account and buy differently to accommodate that.
And don’t forget the tax breaks you get by investing in both retirement and 529 savings plans. That can offset some of your losses—of course, as long as you don’t sell the positions, you haven’t realized your loss because you are still invested and, therefore, will benefit from any increase in market value. So you still have the potential for gain AND you get a tax break. Pretty nifty.
There is no guarantee that you will make money in this market, and there is no promise that you won’t lose—but if you invest relatively conservatively in positions and companies that your financial advisor thinks are stable and will weather the economic storm, then over the next 15-30 years, history and logic tells us, you will see growth.
So why not take all the money you save with the deals you find here on CheapToday and FreeToday, and throw them into a little piggy bank. At the end of each month, make a deposit into your retirement account or your kids’ college savings accounts.
If your kids are fewer than three years away from college, it may be
time to start selling some positions, but you need to talk to an
experienced financial advisor before you do anything rash.
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Thanks to asterisco for the piggy bank photo. Hope they've got more than a dollar in there...